Japan's Sony Group has sent a termination letter to Zee Entertainment to call off a $10 billion merger of their India operations following an impasse over who will lead the combined entity, Bloomberg News reported on Monday, citing sources.

Sony cited unmet conditions of the merger agreement as the reason for the termination in a letter sent to Zee early on Monday, Bloomberg reported. The company is expected to disclose the letter to the exchange later, the report added.

Sony declined to comment, while Zee did not immediately respond to Reuters' request for a comment.

The merger, announced more than two years ago, hit a stalemate over who will lead the combined company. Zee proposed CEO Punit Goenka, but Sony disagreed in light of a market regulator probe into Goenka.

On Friday, Zee had said it was committed to the merger and was working to close the deal through "good faith negotiations". It was seeking to discuss an extension to a January 20 deadline to close the deal.

The deal was perceived as crucial for the survival of the companies in a highly competitive market, given the impending merger between Disney's Indian businesses and the media assets of billionaire Mukesh Ambani's Reliance Industries .

"A deal collapse will have a negative impact on both parties as they were looking at scaling up in the Indian market which is going through a digital disruption and a potential threat of increased competition intensity if the Reliance-Disney deal goes through," said Karan Taurani, an analyst at Elara Capital.

Zee is also contending with declining profits, advertising revenue and cash reserves in a market where global streaming giants such as Netflix and Amazon.com are also jostling for share.

Zee's four-year pact with Disney's Star for TV broadcasting rights of certain cricket events will also be at risk if the deal collapses, as Zee would have to pay $1.32 billion to $1.44 billion over the tenure of the agreement, analysts have said.

The broadcaster missed an early-January deadline to pay $200 million, Bloomberg News reported on January 9.

Zee shares closed 1.5 percent lower in a Saturday trading session in Mumbai. The market is closed on Monday for a public holiday in Maharashtra state.